No-frills federal budget aims to help job seekers, clamp down on tax evaders

Federal Finance Minister Jim Flaherty.

Photograph by: THE CANADIAN PRESS/Andrew Vaughan
, Postmedia News

OTTAWA — The Harper government, midway through its majority mandate, has introduced a no-frills budget that promises to connect Canadians with jobs, slay the deficit by 2015-16 and provide cheaper baby clothing for consumers.

In his fiscal blueprint tabled in the Commons on Thursday, Finance Minister Jim Flaherty revealed the Conservative government will be tight-fisted in new spending while becoming much more aggressive in collecting taxes.

Opposition parties immediately criticized Flaherty for presenting a budget full of smoke and mirrors that fails to help jobless Canadians and is based on dubious assumptions on how easy it will be to eliminate the deficit in two years.

But the finance minister said he has struck the right balance between economic growth and fiscal control.

“We will not waver from our commitment to create jobs and fill jobs for Canadians,” Flaherty told MPs in his budget speech. “We will not spend recklessly.”

At the heart of the government’s plan to boost the economy are proposed new measures to work with provinces and businesses to improve skills training programs so they are matched with jobs in the workforce.

Under the scheme, the federal government, provinces, and an employer will split three ways the $15,000 per-person training grant — although it’s unclear if the program will fail if provinces and companies refuse to participate.

Meanwhile, the government is extending $1.4 billion in tax breaks for the manufacturing sector over two years. And it will continue funding — over 10 years — for the country’s infrastructure in areas such as roads, public transit and drinking water.

But, in the short term at least, the government is refusing to significantly open up the spending taps — with new expenditures rising by just $922 million in 2013-14 and $931 million the following year.

“Our spending in the government of Canada has essentially flat-lined,” Flaherty told reporters. “The spending control is in place. We have a proven track record in controlling our own spending.”

The budget contains a notable emphasis on taxation. While Flaherty insists he won’t raise taxes, the government promises to go to great lengths to raise billions of additional dollars by closing tax loopholes and by using better tax-collection methods at Revenue Canada.

In total, Flaherty says he will collect $316 million by closing tax loopholes in 2013-14. The amounts will mushroom in following years, with the projected savings totalling $4.3 billion over six years.

Similarly, measures to change taxpayer compliance programs at the Canada Revenue Agency will raise an extra $2.3 billion over six years, says the budget.

Among the new measures is a plan to pay snitches who report on those who are hiding their money offshore. Flaherty defended the move, insisting he’ll only be using “clean” information and will not reward people who are complicit in tax-evasion schemes.

“We’re not looking for rogues to turn in other rogues,” he said.

The plan to squeeze costs will also affect how federal public servants go about their work.

The budget aims to save $43 million annually in reduced travel costs by having federal officials stay in their office and communicate with other officials elsewhere in the country using “life-size, full-motion” videoconferencing technology.

At the same time, the finance minister says that on April 1, he will remove tariffs on imported baby clothes and sports equipment, such as skates and golf clubs, that can significantly increase the sticker price for consumers.

Further, Flaherty stressed that he has one clear objective: The multi-billion dollar deficits that he created several years ago to fight the recession must be eliminated.

The deficit now stands at $25.9 billion and is forecast to drop to $18.7 billion in 2013-14.

Flaherty categorically pledged that the governing Conservatives will bring the federal treasury out of the red — into a razor-thin surplus of $800 million — in 2015-16.

That’s the same year that Canadians will next go to the polls in an election, and when Prime Minister Stephen Harper hopes to implement some unfulfilled tax-break promises from the 2011 election that were contingent on a balanced budget.

Flaherty told reporters that he is very confident he will meet his deficit-elimination target.

“We can get there by 2015 with quite moderate choices. We do not need to slash and burn.”

Flaherty rejected the suggestion that he should put less emphasis on the issue, impose fewer budget cuts, and settle for a surplus in 2017.

“I want our country to be in a very solid fiscal position in case, in the future, we have another crisis,” he said, recalling the 2008-09 recession that swept the globe.

“History tells us this: Crises — economic crises, credit crises — are inevitable from time to time. So the best thing we can do for Canada, it seems to me, is to make sure we have a solid foundation.”

NDP Leader Tom Mulcair said the budget adopts the wrong approach at a time when thousands of jobless people need government assistance.

“You cannot austere your way out of a crisis. This is what Mr. Flaherty is attempting to do.”

He was dismissive of the proposed skills training program, saying it’s merely an attempt by the Harper government to take money it normally sends to provinces and slap a “maple leaf” on it to get credit.

Mulcair said the Tories have a horrible track record on their predictions for economic growth and deficit reduction, adding he thinks their predictions in this budget are far too rosy.

Interim Liberal Leader Bob Rae said there is nothing substantive in the budget.

“It is primarily an exercise in propaganda and rhetoric.”

In a surprise move, the budget revealed that the government is merging the Canadian International Development Agency with the Department of Foreign Affairs and International Trade — something which could have an impact on foreign aid policy.

Also, the government served notice that if it can’t reach an agreement with provinces on a common securities regulator, it will introduce legislation — consistent with a 2011 Supreme Court of Canada decision on the matter — that lets it carry out its “regulatory responsibilities.”

The new budget is unveiled amid troublesome economic signs: a sluggish Canadian economy, with forecasted GDP growth this year down to 1.6 per cent from 2.4 per cent; a recession in debt-plagued Europe, and continued economic uncertainty in the United States, this country’s largest trading partner.

“While Canada has fared well, we cannot afford to be complacent,” said Flaherty.

“There are still signs of trouble ahead. The world economy remains fragile. Global growth has slowed. And Canada is not immune.”

Moreover, as debate rages in Canada about the merits of the Keystone XL and Northern Gateway pipelines to bring oil to the U.S. and Asian markets, the Conservative government used its budget Thursday to draw further attention to the issue.

Flaherty warned that a strong energy sector is critical to Canada’s economic growth.

He reported a widening gap between the prices for their product received by Canadian crude oil producers and global benchmarks.

Lower prices for Canadian oil, as well as for natural gas, are reducing the country’s GDP by $28 billion per year — which means $4 billion in reduced revenue for the federal treasury.

Flaherty said this year’s budget builds on his previous economic blueprints — which included massive stimulus spending programs during the recession, and last year’s austere budget which slashes $5.2 billion in spending over three years and eliminates 19,200 jobs in the federal public service.

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